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Tech Investing

Why the Microsoft Reorganization Plan Won't Fix What's Wrong

With a Microsoft reorganization plan expected to be announced on Thursday, investors at this point must be wondering: will it matter?

Shareholders of Microsoft Corp. (Nasdaq: MSFT) have only recently gotten a glimmer of hope. Microsoft stock had languished in the $25-$30 range for more than a decade until this year, which has seen MSFT pop about 30%.

Although extremely profitable, Microsoft under the leadership of CEO Steve Ballmer has struggled to move beyond its core products of Windows and Office, which still deliver nearly all of those profits.

What this new Microsoft reorganization plan needs to do is reorient the Redmond, WA-based company toward future engines of growth, such as the mobile wave of smartphones and tablets, cloud computing and big data.

Insiders say Ballmer intends the new structure to provide "functional coherence" and will align the company into divisions based on services and devices.

But given Ballmer's spotty track record and Microsoft's unwieldy size (98,000 employees), it's not a given that any major structural overhaul will do much good in addressing the company's real problems.

As one worried Microsoft insider told The Wall Street Journal's All Things D: "If this is all about an org chart and not how to build great products, it does not matter what org chart Ballmer presents. Consumers buy products, not management structure."

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Housing Market

Hedge Fund Sues Government Over Seizing Fannie Mae, Freddie Mac Profits

A hedge fund hoping to capitalize on the comeback of Fannie Mae and Freddie Mac claims in a lawsuit the government illegally seized the profits of the two mortgage finance giants.

The suit, filed Sunday by Perry Capital LLC, says the government violated a 2008 law that put Fannie and Freddie into conservatorship, through an amendment changing the terms of the government's bailout.

Under original terms, Fannie and Freddie paid fixed quarterly dividends equal to 10% of the government's stake.

But in 2012, the U.S. Treasury Department amended the terms of the bailout and began taking all Fannie and Freddie's quarterly profits.

Theodore Olson, an attorney representing Perry Capital, said in a news release the 2008 law "established very specific rules about the government's limits and obligations under conservatorship. Investors had every right to expect these rules to be followed.

"If the government wanted to assume the powers of receivership, it could have chosen that course," Olson said. "Instead, it chose conservatorship, and with the [amendment] it overreached, exceeding the legal boundaries of the statute and failing to meet obligations of conservatorship mandated by Congress" under the 2008 law.

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Global Economy

New Basel Banking Regulations Mean Every Bank is its Own Cop

The Basel Committee on Banking Supervision, a global group made up of central banks, just came out with its new bank capital standards, the Third Basel Accord (Basel III), to address some of the problems and weaknesses in global financial regulation.

These problems were seen to have been a partial cause of the global financial crisis.

When banking systems adopt the regulations, which are completely voluntary, it's seen as a step towards greater transparency, a more robust system. It's seen as regulators finally getting tough. This is all part of the mad, frantic scramble for… credibility among regulators.

Sounds Good In Theory

The latest round of Basel III regulations, which were approved and adopted by the Fed just last week, call for banks to begin strengthening and improving the quality of their capital reserves. Quantity and quality of capital are absolutely vital to a healthy banking system.

It was the paradigm of the "honest-to-god, AAA mortgage-backed security," with all of its rubbish quality, willfully overstated and overestimated by U.S. ratings agencies, which helped lead us down the path to collapse just five years ago.

So why not have the banks shore up their defenses, take on more capital of good quality?

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Hot Stocks

Three Stocks to Buy Now to Pocket "Insider" Profits

One of my favorite ways to look into stocks to buy now is to check out what the insiders are getting into.

Insider buying and selling of the shares of the companies they control has often been a way to get excess profits in your portfolio.

Precious Metals

If You Own Gold, You Must See This Chart…

What I'm about to say will challenge even the most steadfast gold bears – or anyone for that matter right now who thinks that gold has seen its better days.

The chart below tells a story – a big story. In fact, I encourage you to forward this email to anyone you know who serious about his money.

Washington

Latest Obama Outrage: More People on Food Stamps Than Are Working Full Time

This Obama economy has soup lines as far as the eye can see. It also appears that many could easily be standing in two, three or even four lines simultaneously!

There are 103.4 million people currently enrolled in any one of
15 subsidized federal food assistance programs. The most people in our nation's history.

Due to the governments sloppy management of resources it's anybody's guess how many people are standing in how many lines, at the same time.

One thing we do know for sure is one third of our nation is now receiving Subsidized Food Assistance.

These programs are extremely expensive and the cost is increasing daily. In 2012 the bill to taxpayers paid was a staggering $114 billion. 

But sit down if you're standing, because it gets worse!

Even more shocking: The Bureau of Labor Statistics (BLS) reports there are 97,180,000 full time workers in the private sector.

This means: The number of people receiving food stamps is greater than the number of people in America working full time.

Never in our nation's history has this been the case. This is a historical first.

Trend Watch

George Lucas and Steven Spielberg Show Us the Future of Entertainment

I grew up in East Baltimore in the 1980s and 1990s, the twenty-year nightmare of peace, growth, and prosperity that we all endured before the New Normal debuted in 2001.

In those days, my Dad would lay $8 or $10 on my kid brother and me, and tell us to go up to the movies, to stay out for the afternoon. Why Dad wanted us out of the house, or what he and Mom got up to in those hours we were gone, I'll never know…

But maybe we'd get some friends and head up to the Patterson Theater, or the Grand Theater. These were East Baltimore's hallowed old dollar movies, the second run theaters. With a veritable king's ransom at hand, we'd spend 99 cents for a ticket and blow the rest on popcorn, drinks, and extremely sugary snacks.

We'd see movies like RoboCop, Ghostbusters II, The Hunt for Red October, Die Hard II, even Weekend At Bernie's or Look Who's Talking. Whatever your fancy, it was an afternoon at the movies for less than $10.

Just like the East Baltimore I knew, those days are long gone. And just like East Baltimore, the movies have changed forever.

Two Giants Give Us a Glimpse of Things To Come

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Washington

How the CFPB is Targeting Americans for Personal Financial Data

Three cheers for privacy rights under the Obama Administration…

And if the sarcasm doesn’t leak from those words, it’s time for me to start designing coloring books.

Last week, the newest Washington agency designed to protect us from ourselves, the Consumer Financial Protection Bureau, was caught collecting data on more than 10 million ordinary Americans without their knowledge or permission.

Not only does the law that created the CFPB, the Dodd-Frank Act, prohibit this sort of data collection, but it is just another example of how government is using poorly designed laws to intervene in the lives of everyone.

The government is once again targeting ordinary Americans while letting the real financial criminals preying on Americans walk away Scott free.

Another “Data Project” Means More Spying on Americans

According to reports, the CFPB has allocated more than $20 million in its budget to collect and track the spending habits of more than 10 million Americans. Despite this new government initiative, Sen. Mike Crapo (R-Ida.) has suggested that the data collection project could become much more widespread than expected.

The agency is in the process of building a database of personal customer information, including monthly credit card, mortgage, car and other financial payments. Private contractors (crony friends of Washington) will store the data and share it with other federal agencies and Congressional staffs whenever it is ever needed – without really explaining why it is needed.

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Energy Investing

Natural Gas Companies: LNG Export Boom Still on the Launchpad

Anyone investing in natural gas companies is eagerly awaiting news that the liquefied natural gas (LNG) export boom is officially underway…

While we still have to wait, the good news is that last week Department of Energy Secretary Ernest Moniz told Reuters his department will go through the applications as quickly as possible. He added that he expects the Energy Department to conduct a “fair amount of action” regarding the applications this year.

This falls in step with the Obama Administration’s energy initiatives, which include a push for the development of “a global market for natural gas.”

This global natgas market will replace the current regional gas markets only if there are large exports of cheap natural gas from the U.S.

Such exports are one main reason Money Morning Global Energy Strategist Dr. Kent Moors is bullish on natural gas prices in the years ahead.

He’s also bullish about the prospects for investors in certain natural gas companies – especially ones positioning to profit from Asia’s need for LNG…

The Sea Route to Asia Paved With Riches

As pointed out by Money Morning Resource Specialist Peter Krauth, selling LNG to Asian countries such as Japan, South Korea and increasingly China will be a lucrative business in the years ahead.

Japan and South Korea are the biggest importers of LNG. Japan, in the year ending in March, imported a record 87 million tons of LNG after shutting down 48 of the country’s 50 nuclear reactors.

That is more than one-third of the world's LNG exports of 240 million tons in 2011.

Hot Stocks

Buy, Sell or Hold: The Remodel of Burger King

It seems that at just about every intersection in America you will find a quick-service restaurant competing for your fast food dollar.

The competition is vicious as the saturation point for these types of restaurants has nearly reached its peak. There are a whole slew of restaurants in this category ranging from burger joints to vegetarian fare and from budget eateries to pricier higher-quality dining.

Each restaurateur tries to find a niche that he can exploit where he can make diners and shareholders happy. The burger niche is where all competitors were spawned and is still the one that garners the most attention.

The players in this arena are household names not only in America but worldwide – McDonald's (NYSE: MCD), Wendy's (NYSE: WEN) and Burger King (NYSE: BKE).

I'm going to focus on Burger King, its business strategy and how it hopes to differentiate itself from its competitors.

Burger King is the number two burger chain in the world with 13,000 restaurants in 86 countries. This is far behind dominant McDonald's and its 34,000 global locations. However, in the U.S., Burger King's situation is disconcerting as it has lost its second place slot to Wendy's with its 6,500 restaurants.

In 2010, Burger King was acquired by Brazilian private equity firm – 3G Capital. After a hiatus from the public markets, 3G Capital took Burger King public again in June of 2012.

When Burger King was first acquired it had a number of issues on its plate that included declining sales, lack of expansion and the same-old menu items. Basically, the company had no vision or dexterity to solve these problems.
Since 3G Capital's acquisition, Burger King has shown signs of new life and seems to have a plan to 'right the ship'. However, is it enough?

The plan can be summarized in one word – "Remodel". Burger King is remodeling its menu items, its stores and the way it does business.

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